DO YOU NEED TO REFINANCE YOUR AUSTIN HOME LOAN?
Are you daunted by the interest rates your current mortgage has? Do you need to lower your monthly payments? Do you just need more cash? If you said, “Yes,” to one of these questions, then you should refinance your Austin home.
Refinancing loans gets you lower interest rates and make monthly payments on your home more affordable. For example, imagine that you took out a loan many years ago and have seen interest rates go down over time. You can pay for that loan by taking out another loan. You would then pay off the new loan at a better rate, saving you money in the long run.
Things to know about refinancing an Austin home loan.
- What is home refinancing?
- What options do I have for refinancing my home loan?
- Can I use refinancing on my home equity?
- What is a FHA 203B refinanced loan?
- What are the components of a FHA 203B refinanced loan?
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What is Home Refinancing?
Home refinancing is when you draw a second mortgage on a mortgage you may already have. There are many reasons why someone would want to draw another mortgage on a previously existing mortgage. Ideally, home refinancing should place you into a better financial state than before your refinancing. When you are done, you should have more cash and a greater peace of mind.
One reason you may want to refinance your Austin home is to pay off a previously existing mortgage. Depending on the real estate market, your interest rates may have changed. What was once a low-interest rate when you bought may be too expensive compared to a current rate. By refinancing, you can pay off one mortgage and then make smaller payments on a completely different mortgage.
Additionally, you could use the money from refinancing to create more investment opportunities for yourself. If you have a child going off to college, you could refinance your home to pay for some of the tuition and fees. Big medical procedures, new commercial opportunities, even a new boat – all of these may be reasons to refinance. If you need to pay for something and do not have the funds to do it, refinancing on your home will allow you to make that leap.
If you do not think you have the credit to refinance, don’t worry. Brad Cullipher Mortgage Group and our team of home refinance advisors can help you along the way. We can talk with your current mortgage holders and try to arrange the best deal possible for you. That way, you’re not left with a bad mortgage and bad creditors breathing down your neck. Our team can help give you the refinance loan you deserve.
What options do I have for refinancing my home loan?
Fixed-rate to adjustable-rate mortgage
If you plan to sell your house in the next few years, refinance your home loan to an adjustable rate mortgage (ARM) to save you some last-minute money. Adjustable rates have the potential to drop below typical fixed rates because the rate is changed each fiscal year. By selling your house in just a few years after refinancing, you’ll minimize your risk and maximize your savings.
The shorter the remaining term is on your loan, the less you have to lose from an adjustable rate. You’re more likely to enjoy low interest rates over the course of three or four years than suffer a spike in interest.
You can also temporarily refinance to an ARM. Follow trends in interest rates and look for valleys in which rates are expected to dip for a few years. Refinance during these times to an adjustable rate mortgage to take advantage of the rates. Then return to a fixed rate once you feel that it’s at a fair price. You’ll have to wait a few years to establish good credit and a positive standing with your lender to be able to switch back to a fixed-rate mortgage.
Adjustable-rate to fixed-rate mortgage
The low introductory rates of adjustable rate mortgages are better for your monthly payments in the beginning of your loan. Once your loan matures, you can eliminate the risk of an ARM and switch to a fixed rate home loan. The fixed-rate loan is a loan with a guaranteed yearly interest rate that will not change over time.
Over the long run, a fixed rate home loan will save you more on interest than the average of the rates you get with an ARM. That’s why switching to a fixed rate loan after a few years is the safest way to minimize your monthly payments.
Long-term to short-term home loan
Changing your loan from long term to short term is a great way to take advantage of a major raise or promotion. When your income rises, you can save on loan interest by refinancing for a shorter period.
Your monthly payments will rise. But as long as your payments are proportionate to your income, you’ll save a lot of money on your loan payments over the long haul.
Short-term to long-term home loan
Should you find your monthly payments unmanageable, you can move to a long-term home loan to reduce them. More time to pay off your loan gives you more short-term financial freedom. Don’t forget that your total interest payment will also increase. However, short term loans force you to pay more per month. Since your long-term loan will be active for longer, your interest has more time to accrue.
Switch to a long-term loan only if you need immediate help with money.
If you have an outstanding mortgage and an additional loan, such as one based on home equity, you can refinance them together. This puts two different loans into one lump sum with one interest rate.
All related loans will be under the same company. Having a single lender:
- Makes payment easier
- Improves your credit
- Unifies your interest
You’ll be able to pay off interest faster and work on your principal balance. It will be harder to miss payments when you have fewer to worry about. Also, closing a mature debt will reflect well on your credit checks.
Can I use refinancing on my home’s equity?
Yes, you can refinance your loans to grow your bank account. By refinancing, you could access your home’s equity. The equity on your home is the difference between your remaining mortgage balance and the value that your home has accrued.
If the value of your home has increased, then you could refinance the home and get a loan for the current value of the house. You could then pay off the initial mortgage and be done with the original loan. You’ll also have immediate access to the leftover money from your equity to make a significant purchase. This extra cash could go to anything costly, including home repairs, a new vehicle, or sending a child to college.
Brad Cullipher Mortgage Group can help you with your home refinancing in Austin. If you are ready, contact our team and we’ll put you in touch with one of our home refinance advisors. Your journey to a new payment plan starts today.
FHA 203b Refinance
An FHA 203b Refinance loan will allow you to refinance your home and make improvements. The value of your home is based on the “As completed” value – meaning once the work is done, your house will be worth more. With this knowledge, FHA allows you to borrow against that “would be” value of your home.
The Federal Housing Administration (FHA) was founded to give you, the prospective homeowner, the ability to get the best home loans out there. They were designed to create competition and get the prices down so people you get the best deals possible. Brad Cullipher Mortgage Group intends to take advantage of those rates for you and make sure you get an outstanding deal on your mortgage as soon as possible.
Components of an FHA 203b Refinance Loan
Refinancing your home allows you to get a lower mortgage payment and saves you money. The FHA 203b is a great loan option for refinancing in Austin. FHA 203b loan terms are set at either 15 or 30 years. This loan is unique because the FHA does not make the interest rates. Rather, rates are decided between the borrower and lender.
The FHA 203b is a popular refinance loan choice due to lower credit requirements and a low down payment of 3.5%. Although FHA is part of the title of this refinance loan, the FHA does not supply the money. Lenders are directly linked to borrowers. This is beneficial because the FHA will not use your credit score is the main decider of your approval for a 203b refinance loan.
There are catches, however. For each county in Texas, there is a specific loan limit. This means you can only withdraw so much per loan. Ideally, this is meant to keep you, and the banks, safe from defaulting and withdrawing too much. The banks have less risk and you can pay back the amount on a reasonable home in a reasonable amount of time.
Most importantly, the FHA will view how consistent and reliable your overall payments have been. However, the FHA seal on this loan protects the lenders from faulty or overdue payments from the borrower. This also prevents foreclosures from happening. Find out if you qualify for an FHA 203B Refinance loan by contacting Brad Cullipher Mortgage Group.
For 2015 loan limits click here